Energy Bill Puts Focus on Fuel Reform

December 18, 2007 at 6:15 PM EST

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The House passed an energy bill Tuesday that sets more demanding fuel efficiency standards for automobiles and calls for increased production of renewable sources of fuel. The bill was passed by the Senate last week. Energy and climate experts assess the tenets and impact of the bill.

JIM LEHRER: Next, the new energy bill that’s about to become law. Ray Suarez has that story.

RAY SUAREZ: The bill the president will sign tomorrow has some big changes in store for the auto industry and other sectors of the economy. For the first time in more than three decades, automakers must increase their average fuel economy for new cars and trucks to 35 miles a gallon by 2020.

Congress also will require a six-fold increase in the production of ethanol and other biofuels not made from corn, up to 36 billion gallons a year by 2022.

And the law requires new energy efficiency standards for building construction and appliances, and it phases out incandescent light bulbs by 2020.

For a closer look, we turn to Jason Grumet, executive director of the National Commission on Energy Policy, a bipartisan group made up of industry, labor and consumer leaders; and Jeremy Symons, the executive director of global warming programs at the National Wildlife Federation; he served as a climate policy adviser at the EPA during the Clinton administration.

Mileage rules see major change

RAY SUAREZ: Jason Grumet, is this a significant upturn in the required mileage for automobiles?

JASON GRUMET, National Commission on Energy Policy: Yeah, Ray, this is a pretty big deal. You know, every president since Nixon, every Congress since Nixon has made these bold calls for energy independence and real expressions of concern about our dependence upon foreign oil.

And this is first time in 30 years we've actually done something about it. We're going to be increasing the fuel economy of passenger cars by 40 percent, from 25 miles a gallon to 35 miles per gallon by 2020.

The law also requires that carmakers and automakers in general start to regulate medium-duty vehicles and heavy-duty trucks. And presently, those vehicles have no fuel economy requirements at all. So this is a real significant...

RAY SUAREZ: Do you agree that it's an ambitious change and a strong requirement for the industry?

JEREMY SYMONS, National Wildlife Federation: It is. It's important. I mean, you need to look at this in terms of the fact that it's really the start of a new direction for America's clean energy future.

For years, we've been fighting energy policies that really are focused on actually technologies that increase pollution and technologies that increase our dependency on fossil fuels, including oil. This is really the first major step, as Jason says, in 30 years, really since the era of the eight-track tape player, that we've taken a bold step to deal with dependency on foreign oil and tackle global warming pollution at the same time.

RAY SUAREZ: Is this a tougher fleet average requirement, though? Will SUVs and light trucks be included in a way that they weren't before? One of the things that spurred the creation of the SUV as an American consumer phenomenon was the fact that they didn't get counted in those averages.

JEREMY SYMONS: Absolutely. And when you look at that, you have to realize that today the average fuel economy of SUVs and cars combined is actually worse than it was 20 years ago. And we've actually gone down at a time when technology has been advancing.

But today, in this law that we're seeing and that the president will sign tomorrow after the leadership we've seen from both the House and the Senate, this actually increases to 35 miles per gallon combined average for SUVs, cars, and light trucks.

It allows the flexibility so that different vehicles with different attributes can meet different standards. But overall, they've got to add up to 35 miles per gallon. So it's a very strong standard from that perspective.

JASON GRUMET: There is a context point internationally, I think. And this is a very big deal. It takes us from kind of being a D-student to now about a B-student.

So in 2020, when we hit 35 miles per gallon, Japan and the European Union will be 10 miles to 15 miles ahead of us. This line us up with Canada and, in fact, with China. So it brings us back, and real progress, but I don't think we should kind of convince ourselves that we've fixed the job.

You know, by 2020, we'll be using about the same amount of oil as we're using today, but we won't be in such a significant situation of worsening the problem.

Political climate sees major shift

RAY SUAREZ: Jeremy, the auto industry and prominent members of Congress closely aligned to the auto industry have been fighting a strong increase in the fleet average standards. Did they just drop the battle and go along with this? How did this happen?

JEREMY SYMONS: Well, it all started with, really, the change in attitudes and the American public demanding action and really the leadership of Speaker Pelosi, and Majority Leader Reid, and Congressman Markey really pushing this issue forward and to a point where it was clear that something had to be done in Congress on this.

But at the end of the day, getting the deal done did require looking at a balance between what's needed in terms of the environment, in terms of oil savings, but also what workers are going to need.

And there was some specific measures that were agreed to in this to make sure that this is going to help workers, that this is going to help families at the pump, and that this is going to help the environment at the same time.

So there was a balance in this. And I agree with Jason: We can probably go further in this. We can definitely go further in this down the road. But this is really turning around what has been a bad energy policy in the right direction, and we have some other steps to go.

RAY SUAREZ: Well, Jeremy just talked about political leadership. How did industry respond to this final set of proposals?

JASON GRUMET: Well, Ray, there was a new coalition that came together that really changed this debate. It was not the traditional fight between the environmental community and the car companies that had been so kind of locked up for so long.

We had a strong voice coming from the national security community, former military leaders. We had number of prominent CEOs coming together and saying, "This is not just about a particular industry or a particular congressional district; it's really broadly about our national interest."

And when the car companies I think realized that something was going to change, they got involved. So it was clearly leadership coming from Speaker Pelosi, but Chairman Dingell, who has been long understood to be there fighting for the interests of the auto companies, you know, rolled up his sleeves with Speaker Pelosi and they really worked out, I think, a pretty meaningful compromise.

What it did was essentially take the stricter standards that the Senate had been proposing and a number of the provisions that provided some competitive benefit to the U.S. companies, and they put those together, so the industry came together around the deal.

Now, they have been fighting this successfully for 30 years. But with $90-a-barrel oil, I think there was recognition that something was going to change, and they wanted to be part of the design.

New law looks beyond corn ethanol

RAY SUAREZ: Well, $90-a-barrel oil brings up my next point. We've been talking a lot about the vehicles themselves. Let's talk about what goes into them. What requirements have been put in place for fuel?

JASON GRUMET: So the way we're going to deal with oil security is we're going to buy time with fuel economy increases while we diversify. Right now, 97 percent of our transportation is fueled by petroleum. And, fundamentally, we don't have a lot of petroleum. So as long as we're using oil, we're going to be depending upon other countries.

The answer is to have a diversity of fuels. And what this legislation does is it requires 36 billion gallons of biofuels. To give you some context, we use about 150 billion gallons of gasoline.

So this is not going to, in and of itself, fundamentally change the dynamic. But it's the first time that we will have a reliance upon a fuel beyond petroleum at a really massive commercial scale.

The importance of 36 billion gallons, I think, is twofold. One, you run out of corn at about 15 billion gallons. So this will force the creation of biofuels from the cellulosic feed stocks, from wood chips, and rice straw, and switchgrass, and a number of things that are much better for the environment, also far more sustainable.

It will also require us to develop a fueling infrastructure. You can't move 36 billion gallons of ethanol around in tanker trucks and rail cars. We're going to create the pipeline and the infrastructure to make this a real part of our fuel system.

So it's a big deal. And it is going to require, I think, a lot of attention to make sure that we get the environmental benefits, as well as the fuel diversity benefits.

RAY SUAREZ: Well, Jeremy, the industry itself, the petroleum industry, complained during the debate that they didn't think they could make these kinds of targets. Will there be new players in there besides the giant oil companies vying for a place in that 36 billion of new, alternative, renewable fuels?

JEREMY SYMONS: Oh, absolutely. I mean, the good news on any clean energy policy is it's going to open up opportunities for investors, for new businesses, for anyone, every time on the environment or other issues that the government has set a clear goal, but giving industry the flexibility to figure out how to get there, new entrants enter the market, and, of course, the old players, the old guard are going to complain and try to stop it.

But you're really looking at some great opportunities for homegrown, clean fuels that are going to reduce pollution and create new business opportunities.

Renewable energy, tax shift dropped

RAY SUAREZ: So this passed by a massive margin in the United States Senate. But in its original version, there were some things in there that were widely commented on as just poison pills. What didn't make it in the final version of this bill?

JASON GRUMET: So, Ray, there were four big issues in front of the Congress. There were the two that passed: fuel economy and biofuel standards.

Then there were the two that failed. One was a requirement to force power companies to sell a larger amount of renewable electricity, wind, and solar, and geothermal.

The second was a provision, kind of a Robin Hood provision, that would have taken tax incentives away from the petroleum industry and used that money to provide incentives for clean energy and for clean coal. And that, also, was defeated.

So I think, of the four, the two most important actually are going to become law tomorrow, but the other two are significant provisions, and I think they'll be back on the agenda.

RAY SUAREZ: And very quickly, before we go, is this going to make enough of a dent in the emissions problem in the United States?

JEREMY SYMONS: It's a down payment on stopping global warming, but we're not done fighting. We need those provisions, and we need a comprehensive bill to reduce global warming pollution. And we need to get that done next year.

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